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Preparing
for THE CLOSING
SplitRock Real Estate
guided you through the fun part of Martha's Vineyard real
estate home buying --- the search and selection. We helped
you negotiate the best possible price and terms for the
property you selected. We helped you select a local attorney.
Yes, we use attorneys for real estate closings. I want to
take a moment to address a question my clients always ask
me: “How much are my closing costs going
to be?”
There is no pat answer to this question, it depends upon
the closing attorney’s fee structure. Some attorneys
have a ‘flat fee’ for closings. Per hour fees
can vary from a couple of hundred dollars to over four hundred
dollars an hour. I suggest to my clients that they interview
several Martha’s Vineyard attorneys.
However, as a general rule of thumb you can assume closing
costs will range from 2% - 7% of the purchase price; more
specifically, between 3% - 4% or 3.5% on average. On the
seller side, the seller’s closing costs are much less,
ranging from 1% - 3% of the selling price.
Buyers please note, this does not include the 2% Martha’s
Vineyard Land Bank Fee that you will pay in full at the
time of closing.
Now back to preparing for the closing.
HOMEOWNER'S INSURANCE
You need homeowner's insurance and SplitRock Real Estate will
help you find an insurance company to protect your investment
after you take possession at the closing. At least ten days
before the closing you will need to get a copy of the bank
appraisal to the insurer you have selected.
You need to get insurance set up for your new Martha's Vineyard
home well in advance of the closing. You may want to shop
around for the best rate and when you decide on an insurance
provider they will require some time to secure the policy.
So you should take care of this at least a week to ten days
before the closing. At that time, you arrange for an appraisal
to be sent to the insurance company. You can either bring
it in yourself or have your loan officer do it. However, keep
in mind that it's ultimately your responsibility, so make
sure that it happens.
On what will the cost of insurance be based? On the age of
the home and its construction, its appraised value, and whatever
choices you make in terms of deductibles and other choices
that will be offered to you. Needless to say, you should shop
around for the best homeowner's insurance deal!
After you and the insurance agent have defined the terms you
want for your policy, like the deductible, they will evaluate
the appraisal (i.e. age, condition, construction, appraised
value) and present you with a quote for the insurance. If
acceptable, you will sign an application and write a check
covering the policy amount in full for the first year. This
expense will be listed on the HUD-1 form as a buyer's P.O.C.
(paid outside of closing) expense. It is important that you
are given a declaration page that lists your policy number,
the amount, type of coverage that you have, who owns the property,
the address and the annual premium along with a receipt showing
that you paid for the policy. These are all documents you
need to bring to the closing. Ask the insurer to send a copy
of these two documents to the lender and/or your attorney.
The seller should have been advised not to cancel his homeowner's
insurance until the title has been transferred and your title
recorded at the Registry of Deeds. Recording usually takes
place within 12 to 24 hours after the closing. Your homeowner's
insurance should go into effect simultaneously.
NOTE: I strongly recommend when a purchase and sale
agreement has been reached, the seller should review his policy
to make certain his homeowner's insurance coverage would cover
the current replacement value of the home. It would be a shame
if the home were damaged and the seller could not cover the
replacement cost up to at least the purchase price.
Once the insurer has the appraisal in hand and has set up
a policy for you, you'll need to go in with a check for the
amount for the first year. Your policy will be written so
as to become effective on the closing date. You hand over
your check and sign an application, and the company gives
you a declaration page (showing your policy number, the coverage
that you have, who owns the house, the address, how much it
costs for the year) and a receipt showing that you paid. These
are items that you need to bring to closing. The insurance
company also generally faxes a copy of these two documents
to the loan officer or settlement attorney.
THE WALK-THROUGH
The closing usually takes place 30 - 45
days after a Purchase and Sale agreement has been executed;
however, it is common with real estate on Martha's Vineyard
for a closing to take as long as 90 days because, for example,
there are rental contracts in place and the owner is responsible
for servicing those contracts. Since the property is being
used by numerous rental tenants during that time it will be
important to confirm that the property is in the same condition
at the time of closing as when the Purchase and Sale agreement
was struck. SplitRock Real Estate will accompany the buyer
during the walk-through, either the morning of the closing
or, the day before the closing. In some cases, we may want
to have the home inspector accompany the buyer and review
the original inspection report to ensure that all agreed upon
repairs have been made and there are no new problem areas.
All the major systems of the house such as the heating system,
plumbing and appliances (if included in the sale) have to
be in proper working order, and this means according to the
manufacturer's specifications. Take your time and do a thorough
inspection of the premises. If a new problem is discovered,
the owner is responsible for making the correction and monies
can be held in escrow to cover the expense.
Otherwise it is the seller's responsibility to get them up
to scratch. You've already had the home inspection, of course,
so there should be no major surprises here. However, that
does not mean there won't be. So take your time on the walk-through,
even though you'll feel a natural urge to get this thing out
of the way so you can take possession of your new home on
Martha's Vineyard.
If it's summertime, turn on that air conditioner and make
sure that the air that comes out is cold. And yes, even it's
summer time, turn on the heat. Make sure the air is hot. Likewise
in winter. Make a special point of this: Test out the systems
that you would not normally use during the current season.
You'll regret not doing that come January, when your teeth
are chattering and icicles are forming on the end of your
nose.
Just so you know, a potential snag can occur with the phrase
"in working order." What exactly does that mean? If the air
conditioning doesn't feel cold enough to you, but it does
to the seller, then who's right?
The answer, for you, is: YOU. You're right. If anything isn't
working, you need to bring it up right away with the seller.
Say what you think. Don't let someone persuade you that the
90-degree air coming out of the duct is really cool. If this
is going to result in a dispute with the seller, so be it.
The two of you will either work it out, or you won't. But
at least you won't be kicking yourself for having been bullied.
THE BIG CHECK You've written a number of checks since you
started on your new Martha's Vineyard home adventure but this
is the one that gets you the keys to the castle. It is going
to be a cashier's bank check so make sure you know exactly
what the bottom line number is and how the seller wants the
check made out. The amount will be on the HUD-1 form (item
603 - Cash To Seller), and you should have a copy of the HUD
by now. The amount covers the closing costs less any deductions
including the earnest money you already put down.
A Fat Check
No, we're not going to talk about your
weight --- or mine.
We're talking about a cashiers check, and it's going to be
a whopper. It will comprise the down payment funds on your
loan, plus closing costs (including attorney's fees, courier's
fees, and so on, all broken down on the settlement sheet).
The earnest money deposit will be subtracted from this amount,
since you've already ponied up that cash. Well, it's time
for the closing so hold on to your hat, open up your wallet
and don't faint.
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